Exam 5: The Foreign Exchange Market

A foreign exchange ________ is the price of one currency expressed in terms of another currency.A foreign exchange ________ is a willingness to buy or sell at the announced rate.

Banks,and a few nonbank foreign exchange dealers,operate ONLY in the interbank markets.

________ make money on currency exchanges by the difference between the ________ price,or the price they offer to pay,and the ________ price,or the price at which they offer to sell the currency.

Which of the following may be participants in the foreign exchange markets?

________ are NOT one of the three categories reported for foreign exchange.

Most foreign exchange transactions are through the U.S.dollar.If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

From the viewpoint of a British investor,which of the following would be a direct quote in the foreign exchange market?

Dealers in the foreign exchange departments of large international banks often function as "market makers." Such dealers stand willing at all times to buy and sell those currencies in which they specialize and thus maintain an "inventory" position in those currencies.

A ________ transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

Define spot,forward,and swap transactions in the foreign exchange market and give an example of how each could be used.

The following is an example of an American term foreign exchange quote:

Which of the following is NOT true regarding the market for foreign exchange?

NDFs are traded and settled inside the country of the subject currency,and therefore are within the control of the country's government.

The ________ is a derivative forward contract that was created in the 1990s.It has the same characteristics and documentation requirements as traditional forward contracts except that they are only settled in U.S.dollars and the foreign currency involved in the transaction is not delivered.

The most commonly quoted currency exchange is that between the U.S.dollar and the European euro.For example,a quotation of EUR/USD 1.2174.The euro is the base currency and the dollar the price currency.

A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days)of foreign exchange.

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

The four currencies that constitute about 80% of all foreign exchange trading are:

A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information: USD/pound = $1.5509/£ and the USD/euro rate = $1.2194/€.Therefore,the euro/pound rate must be: